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The Franchise Memorandum

Posts from April 2009 - Issue 118.

The Alabama Motor Vehicle Franchise Act provides that “notwithstanding the terms, provisions, or conditions of any dealer agreement or franchise or the terms or any provisions of any waiver . . . any person who is injured . . . by a violation of this chapter . . . may bring a civil action . . . “ (emphasis added). In response to a certified question, the Alabama Supreme Court has determined that the Act’s language did not render unenforceable the settlement and release of existing claims. With that direction, the Court in Edwards v. Kia Motors America, Inc., 2009 WL 24198 (11th Cir. Jan ...

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In Raines Imports, Inc. v. American Honda Motor Co., Inc., 2009 WL 230644 (W. Va. Jan. 30, 2009), Raines Imports sought relief pursuant to a state statute requiring manufacturers and distributors to give written notice to motor vehicle dealers located within 15 miles of a location at which the manufacturer or distributor intends to establish or relocate a new dealer. Upon receipt of  the notice, the affected dealer may bring a declaratory judgment action to determine whether good cause exists for establishing or relocating the proposed new motor vehicle dealer. 

The West ...

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Posted in Terminations

Last month the Seventh Circuit reversed a $2.1 million jury verdict and held that the defendant’s action amounted to discontinuation of a product brand, which is good cause for termination under the Maine Franchise Act. FMS, Inc. v. Volvo Const. Equip. N. Am., Inc., 557 F.3d 758 (7th Cir. Mar. 4, 2009). This was the second trip by this case to the court of appeals.

The plaintiff had been a Samsung construction equipment distributor. One year into the relationship, Samsung had sold its construction equipment division to Volvo and given Volvo three years to phase out the use of the Samsung ...

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In Kay Beer Distributing, Inc. v. Energy Brands, Inc., 2009 WL 425821 (E.D. Wis. Feb. 20, 2009), a beverage distributor sued Energy Brands, Inc., alleging violation of the Wisconsin Fair Dealership Law (“WFDL”) and breach of contract. The plaintiff distributor, Kay Beer Distributing, Inc., had been a distributor of Energy Brands’ “Glacéau” line of products, which includes Vitaminwater drinks, but these products  were a very small part of Kay’s business. Kay signed a termination and release agreement ostensibly terminating the distributorship and clearing the way ...

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Posted in Antitrust

The Supreme Court’s landmark 2007 antitrust decision applying rule of reason analysis to resale price maintenance claims brought under federal law was most recently addressed by the Fourth Circuit Court of Appeals in Valuepest v. Bayer, 2009 WL 756901 (4th Cir. March 24, 2009). The defendant suppliers in this case sold through what they called “agency” relationships, as distributors merely facilitated sales to the ultimate purchasers. The resale price maintenance claim arose out of the contractual rights of the manufacturer defendants to set the price at which the product ...

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In Girls Scouts Manitou Council, Inc. v. Girls Scouts Of The United States Of America, Inc., Bus. Franchise Guide (CCH) ¶ 14,037 (7th Cir. Dec. 15, 2008), the Seventh Circuit held that a local Girl Scout council was entitled to the protections of the Wisconsin Fair Dealership Law as a “dealer” and issued an injunction preventing the Girls Scouts of the United States of America, Inc. from reducing the size of the council’s territory. This case arose out of the GSUSA’s attempt to consolidate its national network of local councils into fewer, larger organizations. Girls Scouts ...

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A federal court in Texas has granted summary judgment in favor of Budget Rent-A-Car Corp., finding that Budget did not breach its license agreements with the plaintiff franchisees when Budget’s sister company, Avis Rent A Car Systems, LLC, began operating Avis rental car locations in the franchisees’ exclusive territory. Sirrah Co., Inc. v. Budget Rent-A-Car Corp., 2009 WL 563654 (W.D. Tex. March 4, 2009). Budget became a subsidiary of Avis Budget Car Rental, LLC in an acquisition by Avis. That company is also the parent company of Avis. 

The franchisees in this case executed two ...

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Posted in Terminations

Conversely, in Larry Hobbs Farm Equip., Inc. v. CNH America, LLC, 2009 WL 153357 (Ark. Jan. 22, 2009), the Supreme Court of Arkansas answered much differently questions from a federal court regarding the interpretation of provisions in the Arkansas Franchise Practices Act (“AFPA”) and the Arkansas Farm Equipment Retailer Franchise Protection Act (“AFERFPA”). This case arose after CNH America informed Hobbs it would no longer be supplying “DMI” brand equipment to Hobbs because CNH was withdrawing that product from the market. CNH had been selling identical tillage ...

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The federal Eighth Circuit Court of Appeals has affirmed the denial of an injunction sought by a distributor under the Minnesota Franchise Act. Coyne’s & Co., Inc. v. Enesco, LLC, 553 F.3d 1128 (8th Cir. Jan. 23, 2009). The distributor had sought to prevent the termination of its distributorship agreement. Coyne’s & Co. had entered into an exclusive North American Distributorship Agreement with Country Artist, Ltd. (“CA”) for a product line manufactured in England. Several years later, CA was placed into receivership and its assets were sold to Enesco, LLC. Soon ...

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The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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